So the Obama administration is announcing a big new housing bailout later today. There are a number of details we don’t know yet. A lot remains unclear. Apparently, the White House is going to “encourage” banks to write down the value of loans held by borrowers in modification programs. So while it appears banks will have an opt-out, it’s all very unclear. Incidentally, this homeowner bailout also raises the serious issue of moral hazard.
At first glance, it looks like we’re witnessing more government interference in the private-sector economy, more mandates, and more government economic controls. The government shouldn’t be telling lenders what they must do.
Of course, if private banks like Bank of America want to reduce mortgage-loan balances, fine. So be it. That’s their business decision. But government should not interfere with private contracts between borrowers and lenders. This is a fundamental rule of law, and it lies at the very heart of free-market capitalism. Break that rule and you break the whole system. It’s all wrong.
Now, if the banks do have an opt-out, and if they don’t have to play along, I say fine once again. But my fear is that Uncle Sam, by using various carrots and sticks, will force banks into positions they do not want to be in.
All this suggests why my friend Dan Henninger had it totally right in his Wall Street Journal column this week, “Repeal the Democrats.” The Democrats are the party of big government. They have completely deserted Bill Clinton’s moderate legacy. Meanwhile, Republicans have clearly become the party of the private sector. If they stick to their guns, the GOP is on the right track.
As for the new housing bailout, all Republicans should oppose it, just as they correctly opposed Obamacare and the massive tax-and-spend “stimulus” package.
Speaking of Obamacare, what about the fallout from taxing Caterpillar and 3,500 other American corporations? How about a medicine-cabinet tax on your Tylenol gel caps, and everything else you purchase over-the-counter? This is all nuts.
Believe me, just as it was with the stimulus package, the more we learn about Obamacare, the worse it’s going to get. This is why I say it’s time for Republicans to stand up on their hind legs and shout down their opposition. Washington is producing products that the rest of the country simply doesn’t want to buy.
We will soon see how all of this turns out. There may be a game-changing political revolt in the cards come November. Now that would be wonderful news.